Overcoming Resistance to Diversity in theExecutive Suite: Grease, Grit, and the

Corporate Promotion Tournament

Donald C. Langevoort*

Table ofContents

I. Interdisciplinary Prospects 1615

II. Diversity and the Corporate Promotion Tournament 1622

III. Firm-Wide Efficiency 1632

IV. Self-Serving Resistance 1633

V. Constructive Intervention 1635

1. Interdisciplinary Prospects

The dominant strains of corporate governance theory are far removedfrom the scholarship in employment and discrimination law. The two fieldsoccupy distant workspaces and almost never talk to each other. The principalreason is that most corporate legal scholars have deliberately defined theirfield so that it addresses only a single, if crucial, subject: the allocation ofcontrol over firms between managers and suppliers ofcapital-investors.} So

* Copyright 2004, Donald C. Langevoort, Thomas Aquinas Reynolds Professor ofLaw,Georgetown University Law Center. This work was supported by the Georgetown-SloanProject on Business Institutions. Thanks to Carrie Menkel-Meadow, Kathy Stone, MargaretBlair, Mitu Gulati, Kim Krawiec, participants of the Washington & Lee Symposium on CriticalRace Theory, the NYU Conference on Behavioral Analyses of Workplace Discrimination, andfaculty workshops at Georgetown and the University ofNorth Carolina for their encouragementand suggestions.

1. For the most recent celebration of this perspective, see Henry Hansmann & ReinierKraakman, The End ofHistory for Corporate Law, 89 GEO. L.J. 439 (2001) ("There is no longerany serious competitor to the view that corporate law should principally strive to increase long­term shareholder value. ").

1615

1616 61 WASH. & LEE L. REV 1615 (2004)

restricted, the field leaves to others the task of thinking about the legalrelationships between the firm and other stakeholders, including those whosupply its labor.

Some corporate scholars chafe under this restricted vision and seek toredefine the boundaries ofcorporate law so as to encourage2~or in some caseseven require3-the board of directors to take into account the interests ofemployees, bringing employment law and corporate law into closer contact.But their project has yet to gain anything close to the upper hand. Some oftheresistance is no doubt ideological-there is a strong conservative streak withinthe community of corporate scholars, and many of the critics of the narrowvision of corporate law have an openly progressive agenda. I suspect, though,that others fear that the field will lose its intellectual specialty if it expands toofar in the direction of open-ended constructs like "team production ,,4 or"connected contracts. ,,5 Yet regardless of the eventual scholarly consensus onwhether corporate law should shift away from exclusive attention to investorinterests, the corporate theory informing that inquiry uses a much wider-angledlens. Economists, whose ideas orthodox corporate law scholars habituallyborrow, certainly have no similar self-imposed limits on their interests."Theory of the firm" work translates into a strong interest in employmentcontracts and structural relationships, resulting in a melding ofeconomics andhuman resources.6 Economists studying the principal-agent problem have long

2. See LAWRENCE E. MITCHELL, CORPORATE IRRESPONSIBILITY: AMERICA'S NEWESTEXPORT 118-19 (2001) (suggesting that the legal duties owed to shareholders by the board ofdirectors should be relaxed to allow for greater concern for the corporation's otherstakeholders).

3. See Kent Greenfield, Using Behavioral Economics to Show the Power and Efficiencyo/Corporate Law as Regulatory Tool, 35 U.C. DAVIS L. REv. 581,607-08 (2002) (broadeningfiduciary duties to include a duty to employees); Marleen A. O'Connor, The Human CapitalEra: Reconceptualizing Corporate Law to Facilitate Labor-Management Cooperation, 78CORNELL L. REv. 899,950-53 (1993) (discussing actions taken by courts and legislatures thathave allowed a board of directors to consider the interests of other stakeholders when importantstrategic decisions are made). An older strand of this thinking with European roots advocatesthe placement of labor representatives on corporate boards of directors. E.g., Katherine VanWezel Stone, Labor and the Corporate Structure: Changing Conceptions and EmergingPossibilities, 55 U. CHI. L. REv. 73, 158-59 (1988) (discussing the presence of a laborrepresentative on the board of directors as a possible way to protect labor' s interests).

4. Margaret M. Blair & Lynn A. Stout, A Team Production Theory o/Corporate Law, 85VA. L. REv. 247, 249 (1999).

5. G. Mitu Gulati et aI., Connected Contracts, 47 UCLA L. REv. 887,894 (2000).6. See generally JAMES N. BARON & DAVID M. KREPS, STRATEGIC HUMAN RESOURCES:

FRAMEWORKS FOR GENERAL MANAGERS (1999); PAUL MILGROM & JOHN ROBERTS, ECONOMICS,ORGANIZATION AND MANAGEMENT (1992). The "principal-agent" problem is one ofthe organizing ideas of this literature with an immense influence on the study ofcorporate

OVERCOMING RESISTANCE TO DIVERSITY 1617

been interested in institutional arrangements that optimize the efficiency andproductivity ofthe firm, something hardly limited to the resolution ofconflictsbetween managers and investors.

Since the early 1970s, work in corporate law has closely followed theinterests of the economists, and it continues to follow in this direction. 7

Having gained some fluency with more expansive ideas about how firms areorganized, scholars who think of themselves as "corporate" are seeingconnections to other legal disciplines and are applying their skills andinsights to problems in the borderland. I suspect that this expansion ofinterests will gradually transform "scholarship of the firm." Following thelead of corporate scholars like Margaret Blair, more attention will be paid toinstitutional arrangements-both contract and legal design-that facilitateproductivity through more sophisticated approaches to human resourceswithin organizations. 8 We already see some signs ofthis increased attentionin work on "virtual corporations,,9 and in David Millon's exploration ofemployment security inside the firm. 10 Stephen Bainbridge's writing on theconnections between corporate decisionmaking and participatory workgroup

governance law. See Michael C. Jensen & William H. Meckling, Theory of the Firm:Managerial Behavior, Agency Costs and Ownership Structure, 3 J. FIN. ECON. 305, 308-10(1976) (describing the agency costs associated with the separation of ownership andmanagement inherent in corporations as legal entities).

7. One benefit from this movement is as an antidote to the myopia that comes from toomuch focus on the manager-investor connection. Simply by way of illustration, securities lawscholarship looks at the matter of corporate discourse solely through the lens of management­investor communications. Most corporate communications, however, have audiences other thaninvestors that have not really been taken into account by securities regulation. See Donald C.Langevoort, Half Truths: Protecting Mistaken Inferences by Investors and Others, 52 STAN. L.REv. 87, 103-04 ( 1999) (describing different types of corporate communications that areaddressed to audiences other than the corporation's shareholders).

8. See, e.g., Margaret M. Blair, Firm-Specific Human Capital and Theories ofthe Firm,in EMPLOYEES AND CORPORATE GOVERNANCE 74-80 (Margaret Blair & Mark Roe eds., 1999)(addressing various institutional arrangements designed to retain employees in an effort to retainfirm-specific human capital). For a perspective outside the corporate perspective, see KatherineVan Wezel Stone, Policing Employment Contracts Within the Nexus-ofContracts Firm, 43 U.TORONTO LJ. 353, 376 (1993) (suggesting that unions be allowed to participate in strategic­level corporate decisions so as to put labor on an "equal footing with all other contenders forpower within the concern"); Katherine V. W. Stone, The New Psychological Contract:Implications ofthe Changing Workplace for Labor and Employment Law, 48 UCLA L. REv.519, 568-72 (2001) (describing the new psychological contract as general training, market­based pay, and networking opportunities instead ofjob security and internal promotions).

9. See generally Claire Moore Dickerson, Spinning Out of Control: The VirtualOrganization and Conflicting Governance Vectors, 59 U. PITT. L. REv. 759 (1998).

10. See generally David Millon, Default Rules, Wealth Distribution, and Corporate LawReform: Employment at Will Versus Job Security, 146 U. PA. L. REv. 975 (1998).

1618 61 WASH. & LEE L. REV 1615 (2004)

arrangements 11 is another nice inquiry into this type of issue, as is-in a verydifferent direction-research by Stewart Schwab and Randall Thomas on theexercise of shareholder voting rights by labor unions and pension plans. 12

This Article follows in that spirit. Once we open the corporategovernance/human resources nexus to deeper inquiry, mutual scholarly interestin diversity and discrimination follows naturally.13 Firms have complexmotives to take nondiscrimination and the promotion of diversity seriously.First, at least certain forms of discrimination are both unlawful and sociallyillegitimate and hence present threats of potential liability and injury toreputation. Second, human resources demands are such that attracting andmotivating a diverse workforce is a competitive imperative. At the same time,however, offsetting economic forces may exist that favor subtle forms ofdiscrimination and hostility to diversity, even if intentional and overt racial orgender-based bias is mostly outdated. 14 In sum, the process of promoting

11. Stephen M. Bainbridge, Participatory Management Within a Theory ofthe Firm, 21 1.CORP. L. 657, 680-84 (1996) (finding that participatory management improves corporatedecisionmaking by efficiently channeling information obtained from low-level employees to theproper decisionmaker).

12. See generally Stewart J. Schwab & Randall S. Thomas, Realigning CorporateGovernance: Shareholder Activism by Labor Unions, 96 MICH. L. REv. 1018 (1998). Mysuspicion is that a similar blending will occur along the boundaries between corporate law andintellectual property law, creating something of a triangulation of interests.

13. I do not suggest that this particular nexus is entirely unexplored-scholarship isemerging on a number ofdimensions relating to corporate law. E.g., Steven Ramirez, A Flaw inthe Sarbanes-Oxley Reform: Can Diversity in the Boardroom Quell Corporate Corruption, 77ST. JOHN'S L. REv. 837, 837-40 (2003) (suggesting that boards of directors with diversememberships are more likely to scrutinize the business because the members have fewer sharedcommon characteristics); Cheryl L. Wade, Racial Discrimination and the Relationship Betweenthe Directorial Duty ofCare and Corporate Disclosure, 63 U. PITT. L. REv. 389, 413-16 (2002)(advocating that unadjudicated and adjudicated discriminatory conduct be disclosed toinvestors). The economics literature on discrimination is extensive. See generally Joseph G.Altonji & Rebecca M. Blank, Race and Gender in the Labor Markets, in 3C HANDBOOK OFLABOR ECONOMICS 3143 (Orley Ashenfelter & Richard Layard eds., 1999); Brian L. Goffet aI.,Racial Integration as an Innovation: Empirical Evidence from Sports Leagues, 92 AM. ECON.REv. 1'6 (2002) (finding that sports teams with racially integrated teams performed better thannonintegrated teams); Paul Milgrom & Sharon Oster, Job Discrimination, Market Forces andthe Invisibility Hypothesis, 102 Q.J. ECON. 453 (1987) (finding that racial discrimination iscaused in part by the lack of visibility of minorities in the labor market).

14. See Frances J. Milliken & Luis L. Martins, Searching for Common Threads:Understanding the Multiple Effects ofDiversity in Organizational Groups, 21 ACAD. MGMT.REv. 402, 420 (1996) (stating that "groups and organizations will act systematically to drive outindividuals who are different from the majority, unless this tendency to drive out diversity ismanaged"); see also Altonji & Blank, supra note 13, at 3168-76 (examining different modelsthat explain statistical data suggesting the presence of ongoing discrimination in labor marketsfor women and blacks).

OVERCOMING RESISTANCE TO DIVERSITY 1619

diversity and ending discrimination, whether to avoid liability or simply toremain competitive, is a difficult challenge faced by many firms. 15 It demandsa close look at the efficacy of the internal decisionmaking and authoritystructures of the firm.

Two recent papers piqued my interest in the connection between corporategovernance and diversity initiatives. One, by Devon Carbado and Mitu Gulati,claims that critical race theory has much to gain from taking account of themanagerial literature on the connections between efficiency and homogeneityinside the firm, and that law and economics, in turn, should take more seriouslythe dynamic social construction of race inside the workplace. 16 In other words,both genres would benefit from constructive dialogue. The other is SusanSturm's thoughtful article on "second-generation" discrimination inorganizational settings. 17 At the risk of oversimplification, her point is thatmore subtle forms of employment discrimination cannot be eradicatedsuccessfully using old-style legal commands and controls. 18 Rather, courts andothers wanting to promote diversity have to tweak organizational structures,setting in motion intrafirm processes that spot and solve problems creativelyand cooperatively. She points to experiences at companies such as Deloitte &Touche, Intel, and Home Depot as positive examples. 19

Carbado and Gulati are pessimistic about countering the subtle pressurestoward homogeneity except by fairly aggressive and vocal means. 20 Bycontrast, Sturm's article strikes an optimistic note about possible ways of

15. See Milliken & Martins, supra note 14, at 414-20 (finding not only that diversityincreases the quality of group decisions but also that groups tend to become less diverse overtime).

16. See Devon W. Carbado & Mitu Gulati, The Law and Economics of Critical RaceTheory, 112 YALE LJ. 1757, 1761-64 (2003) (reviewing CROSSROADS, DIRECTIONS, AND ANEW

CRITICAL RACE THEORY (Francisco Valdes et al. eds., Temple University Press 2002))(discussing the potential value of collaborative efforts between law and economics and criticalrace theory disciplines).

17. Susan Sturm, Second Generation Employment Discrimination: A StructuralApproach, 101 COLUM. L. REv. 458,460 (2001).

18. Id. at 460-62.19. Id. at 491-519.20. They accept that firms are currently pressured to achieve some diversity but will

respond by preferring minority group members who effectively deny their diversity and preservethe prevailing homogeneity. For a further exploration along these lines dealing with law firms,see David B. Wilkins, From "Separate is Inherently Unequal" to "Diversity is Good forBusiness": The Rise ofMarket-Based Diversity Arguments and the Fate ofthe Black CorporateBar, 117 HARV. L. REv. 1548, 1567 (2004) (stating that black lawyers were allowed into largecorporate law firms so long as they "were functionally indistinguishable from the white lawyersthat these institutions had always hired").

1620 61 WASH. & LEE L. REV 1615 (2004)

addressing second-generation discrimination. 21 While I hope Sturm is right,my intuition is that we need to understand the likely points of resistance todiversity initiatives more fully before making any confident judgment aboutwhat mayor may not work in a larger universe of firms. 22 Knowledge oforganizational behavior should be useful here because, although somegrounds for resistance will have distinct racial or gender overtones, othersmay fall into the more generic categories familiar to those who study howfirms seek to promote any form of change or redirection among itsemployees. And the tone ofmuch ofthe research about "top-down" efforts tochange the embedded practices and directions within an organization is farfrom optimistic. 23 We have to understand the nature of the foreseeableorganizational resistance before we can deal with it. Through their darkerlens, Carbado and Gulati explore some of these barriers but do not go farenough in playing out the likely consequences in terms ofeither the social orthe political dynamics inside the firm. Unfortunately, the existing socialscience research does not tell us enough to be highly confident in assessingthis problem. Hence, my contribution, also drawing from the melding ofconventional and behavioral economics with the study of organizationalbehavior along the lines of much of the new institutional economics,24 isspeculative.

21. See generally Sturm, supra note 17.

22. See Parshotam Dass & Barbara Parker, Strategies for Managing Human ResourceDiversity: From Resistance to Learning, 13 ACAD. MGMT. EXECUTIVE 68,72 (1999) (findingthat successful implementation of diversity initiatives depends on the intensity of the externalpressures for promoting diversity and the extent to which management has made diversity apriority).

23. See, e.g., CHRIS ARGYRIS, OVERCOMING ORGANIZATIONAL DEFENSES: FORMULATINGORGANIZATIONAL LEARNING 2-3 (1990) (reporting a study that showed that board membersoften believe that they have inadequate power to effectively carry out their responsibilities andaddress potential management problems); Harvey Leibenstein & Shlomo Maital, TheOrganizational Foundations ofX-Inefficiency: A Game-Theoretic Interpretation ofArgyris'Model ofOrganizational Learning, 23 J. ECON. BEHAV. & ORG. 251, 257 (1994) (finding thatdefensive behavior in management is responsible for suboptimal organizational performance);Nelson P. Repenning & John D. Sterman, Capability Traps and SelfConfirming AttributionErrors in the Dynamics of Process Improvement, 47 ADMIN. SCI, Q. 265, 284-92 (2002)(arguing that attributing low productivity to flaws in the workforce rather than in the workprocesses causes potentially valuable process improvements to be overlooked). For afascinating case study of a top-performing group's defense mechanisms and subsequent failure,see generally Paul Levy, The Nut Island Effect: When Good Teams Go Wrong, HARV. Bus.REV., Mar. 2001, at 51.

24. For a good overview, see Oliver E. Williamson, Introduction to ORGANIZATIONTHEORY: FROM CHESTER BARNARD TO THE PRESENT AND BEYOND 3, 9 (Oliver Williamson ed.,1990) (stating that economics and organizational theory are beginning to blend together).

OVERCOMING RESISTANCE TO DIVERSITY 1621

A conversation between governance and discrimination scholars aboutwhat happens inside the firm will be productive only if there is an acceptablecommon rhetoric. Much of orthodox corporate law work is dominated by themetaphor of the firm as a "nexus of contracts. ,,25 While that may beunderstandable as economists broadly understand the word "contract," it isjarring-and perhaps disturbing-when it takes on a normative connotationthat assumes both legal enforceability and strong contractual "freedom. ,,26 Amore inclusive description, from which much of what follows proceeds, is a"nexus of negotiations": The work among people within corporations is aseries of negotiations that constantly redefine the situation in which theparticipants find themselves (negotiations of reality) and how they shouldrespond (negotiations of power, authority, and action).27 Because realitychanges constantly, any understandings are inevitably temporary, yet theyplainly influence all the construals and choices that follow. One virtue of thismetaphor is that it captures the firm's cognitive and cultural dimensions­something that by all accounts is crucial to any deep understanding-whereasthe contract metaphor does not. 28

In turn, that metaphor also hints at how to be constructive. If thedominating image within the firm is the complex set of ongoing negotiations,then the central task ofany lawyer, manager, or anyone else who wants to havean influence is to combine the roles of negotiator and mediator, rather thanacting as an authority figure. Sometimes such a person can bargain for his orher own version of reality and power. But effective influence will come moreoften from being able to intervene in the negotiations among others in the firmin a way that facilitates a better outcome. Fortunately, much work in

25. See generally Symposium, Contractual Freedom in Corporate Law, 89 COLUM. L.REv. 1395 (1989).

26. Hence, the endless debate among corporate scholars as to whether to allow contractual"opt-outs" of fiduciary responsibilities. Lucian Arye Bebchuk, The Debate on ContractualFreedom in Corporate Law, 89 COLUM. L. REv. 1365, 1396-97 (1989).

27. The classic texts in organizational behavior take this perspective almost as a given.See generally JAMES MARCH, DECISIONS AND ORGANIZATIONS (1988); JEFFREY PFEIFFER,MANAGING WITH POWER (1992); KARL E. WEICK, SENSEMAKING IN ORGANIZATIONS (1995). Formy effort to integrate this concept into a legal theory of why corporations commit fraud, seegenerally Donald C. Langevoort, Organized Illusions: A Behavioral Theory of WhyCorporations Mislead Stock Market Investors (and Others), 146 U. PA. L. REV. 101 (1997).

28. On the influence offirm culture from the standpoint oftransaction cost economics, seegenerally David M. Kreps, Corporate Culture and Economic Theory, in PERSPECTIVES ONPOSITIVE POLITICAL ECONOMY 90 (James E. Alt & Kenneth A. Shepsle eds., 1990); David M.Kreps, The Interaction Between Norms and Economic Incentives: Intrinsic Motivation andExtrinsic Incentives, 87 AM. EeoN. REv. 359 (1997) (discussing the rationale for adhesion tonorms by individuals).

1622 61 WASH & LEE L. REV. 1615 (2004)

psychology and economics teaches how to negotiate and mediate better,29 skillsthat would be useful in promoting organizational compliance with the law andwith aspirations in promoting diversity and nondiscrimination.

II. Diversity and the Corporate Promotion Tournament

Discrimination can be found at any level of business organization, fromthe hiring ofblue-collar workers to the high-level decisions on the compositionof the senior executive team. Here, the focus will be on the middle and upperlevels of the organization. The study of middle managers, especially, is aneglected subject in corporate governance and the "legal" theory of the firm. 30

By all accounts, much ofthe real work ofthe organization occurs there. Just asimportant, senior managers ascend, at least initially, based on their performanceas middle managers. A better understanding of this world is essential for bothcorporate academics and those interested in the fairness of patterns of hiringand promotion within corporations. 31

From an economics perspective, the standard question in studyingdiversity and discrimination in the firm is whether discrimination is, onaverage, efficient or inefficient in terms of productivity or profitability. If it isinefficient, as conservative critics of affirmative action habitually point out,32then there is the rosy possibility that patterns of discrimination should whitheraway as competition forces its elimination. But this will not occur if either oftwo conditions is present individually, much less simultaneously. Onecondition is insufficient competition, so that the residual rents can continue to

29. See generally BARRIERS TO CONFLICT RESOLUTION (Kenneth J. Arrow et al. eds. 1995);Carrie Menkel-Meadow, Aha? Is Creativity Possible in Legal Problem Solving and Teachablein Legal Education?, 6 HARV. NEG. L. REv. 97 (2001) (discussing an improved legal problemsolving model which includes symbolic and logical thinking as well as "legal creativity").

30. See Gerard Hertig, Corporate Governance in the United States As Seenfrom Europe,1998 COLUM. Bus. L. REv. 27, 41 (noting that "[t]he role of middle management as such islargely ignored" in traditional studies of the internal organization offirms, which instead focuson the board and its committees or the CEO and top management). For a discussion of middlemanagers from the managerial literature, see generally Quy Nguyen Huy, Emotional BalancingofOrganizational Continuity and Radical Change: The Contribution ofMiddle Managers, 47ADMIN. SCI, Q. 31 (2002).

31. See Roy Radner, Hierarchy: The Economics ofManaging, 30 J. ECON. LIT. 1382,1382-84 (1992) (discussing the importance of managing within the modern firm).

32. E.g., Richard Posner, An Economic Analysis ofSex Discrimination Laws, 56 U. CHI.L. REv. 1311, 1321-25 (1989).

OVERCOMING RESISTANCE TO DIVERSITY 1623

support a taste or habit for discrimination. The other condition is thepersistence of positive efficiencies to discrimination, a possibility explored afew years ago by David Charny and Mitu Gulate3 and elaborated upon morerecently by Gulati and Devon Carbado. 34 They identify reasons whydiscrimination could be consistent with efficiency, including the possibility thatinteractions among employees are more productive when the employees sharecommon traits-backgrounds, interests, patterns ofspeech-associated with acommon race or gender. 35 Trust, a crucial element of work within the firm,may develop more easily within a homogenous group. Without in any waydoubting that this bias is the product of past discrimination and whollyillegitimate, the possibility that there are efficiencies to the perpetuation ofbiascalls for a different normative approach. Charny and Gulati, drawing fromwork by Edward Lazear and Sherwin Rosen, play out this possibility bythinking through its implications when employment patterns in a firm areorganized in a tournament fashion-one where employees are matched againsteach other for eventual selection as one of the small group that becomes thesenior management team with extraordinary status and compensation.36 In thissetting, rational employees make investment decisions in their careers with aview toward the rewards associated with the large, but risky, winner's prize.3

?

33. See David Charny & G. Mitu Gulati, Efficiency-Wages, Tournaments, andDiscrimination: A Theory of Employment Discrimination Law for "High-Level" Jobs, 33HARV. C.R.-C.L. L. REv. 57,77-83 (1998) (discussing reasons why an "economically rational"firm may discriminate). For a further extension of this view critiquing antidiscrimination lawand finding positive externalities associated with a taste for homogeneity, see generallyRICHARD EpSTEIN, FORBIDDEN GROUNDS: THE CASE AG.AJNST EMPLOYMENT DISCRIMINATIONLAWS (1992).

34. See Carbado & Gulati, supra note 16, at 1813 (arguing that outsider groups, such aswomen and minorities, may feel the need to do extra "identity work" at their jobs to counter thestereotypes they perceive themselves subjected to, which may result in lost opportunities andincreased burdens).

35. Charny & Gulati, supra note 33, at 66-67. Because of this, they suggest, employersmight rationally predict a nonminority candidate to outperform a minority one. See id. at 66(noting that the costs of integrating minorities into the workplace might arise from thereluctance of typical workers to cooperate with minority workers because of the differentexternal characteristics of minorities).

36. See, e.g., Edward P. Lazear & Sherwin Rosen, Rank-Order Tournaments as OptimumLabor Contracts, 89 J. POL. ECON. 841, 847 (1981) (discussing the relationship betweencompensation and incentives in relation to output and rank within the firm).

37. In particular, a minority group member might rationally perceive discrimination andfail to invest as much in the skills necessary to win the tournament or else might be inclined totake excessive risk. See Rosabeth Moss Kanter, Differential Access to Opportunity and Power,in DISCRIMINATION IN ORGANIZATIONS: USING SOCIAL INDICATORS TO MANAGE SOClALCHANGE52 (R. Alvarez et al. eds., 1979) (proposing tools to measure whether there is a systematicdisadvantage by race or gender within organizations by examining distributions ofopportunity

1624 61 WASH. & LEE L. REV 1615 (2004)

I want to explore this same terrain but very differently. First, I want torelax the rationality assumption considerably, substituting assumptions drawnfrom psychology and behavioral economics. Second, I want to drill a bit deeperinto the tournament structure ofthe firm's promotion practices to ask, as I havedone in another recent work,38 a largely ignored question (at least by legalscholars) that is both central from a corporate governance perspective and alsohas implications for discrimination and diversity: Are there certain types ofpeople, in terms of psychological makeup, who are statistically more likely towin the successive rounds of the internal promotion tournament so that themakeup ofthe final winner's circle-the executive suite-is disproportionatelypopulated by them?

My prediction is that something other than pure-form rationality is likelyto be the dominating trait among the survivors.39 That is, there may be certain"unrealistic" cognitive biases that are adaptive in tournament play and thusrewarded. If this hypothesis is right, we will have a very important corporategovernance insight because the central task of governance is to constrain thebehavior of those granted the largest amount of managerial discretion. Anyspecial biases within this rarified group need to be understood thoroughly inorder to create the right institutional design. 40 The task is to consider whatthose adaptive biases might be and then to think about the implications in termsnot only of governance41 but also of diversity and discrimination.

and power).

38. E.g., Donald C. Langevoort, Resetting the Corporate Thermostat: Lessons from theRecent Financial Scandals About Self-Deception, Deceiving Others and the Design ofInternalControls, 95 GEO. L.J. (forthcoming 2004) (on file with the Washington and Lee Law Review).

39. Psychologists have long been aware of the economists' predictions and have studiedthe presence ofcognitive bias in "expert" populations. While experts do indeed think differentlyand generally more effectively than the general population, they are by no means immune frombias.

40. See MICHAEL MACCOBY, THE GAMESMAN: THE NEW CORPORATE LEADERS 15 (1976)(noting that the premise of the book is that in order to succeed, any strategy for social changemust take into account corporate managers because of their influence on the work and lives ofothers). Maccoby's more recent prediction-which looks good in light of the recent financialscandals-is that highly narcissistic individuals are likely to become leaders oforganizations inunstable market settings because of their ability to communicate a vision and confidence.Michael Maccoby, Narcissistic Leaders: The Incredible Pros, the Inevitable Cons, HARV. Bus.REV., Jan.-Feb. 2000, at 69, 69-71. If Maccoby is right, corporate governance experts mightwant to take into account the propensity of narcissists to deny and hide the truth.

41. Langevoort, supra note 38.

OVERCOMING RESISTANCE TO DIVERSITY 1625

Let us begin by taking a closer look at the structure ofthe toumament.42 AnaIve account of managerial hiring or promotion is that it is solely skill­oriented. In this account, technical skills in doing a specific job dominate theevaluation process, defining the "merit" on which selection should be based.But the managerial literature emphasizes something very different. Much ofthe time, middle managers are organized into a work team that must, throughthe process of ongoing negotiation, solve a sequence of problems in carryingout its responsibilities and then negotiate with others the perception of howwell or poorly the team performed.43 The common practice in mostcorporations is to rotate middle managers through many different work groups,evaluating each set ofperformances with a combination of individual and groupassessments. Promotions within the organization are based on theseevaluations.44 One author insightfully calls these "probationary crucibles,,45because they require iterated success ifthe person in question is to survive andthrive.

If that is accurate, then we should observe an interesting tension in thehiring process. On one hand, the firm may want people who are entrepreneurial("self starters"), who have the kind of ambition, work ethic, and risk toleranceto perform well as individuals. These, after all, are characteristics associatedwith future leadership. At the same time, however, the firm will also recognizethe need to find people who will fit well into the many teams to which they willbe assigned. They will also, then, look for traits like loyalty and "being a teamplayer," which are not perfectly consistent with the first group of traits.

Put aside for a moment what kind of person best fits this mix ex ante.Hiring is a heuristic step,46 subject to rigorous, albeit subjective, empirical

42. For simplicity, I will not discuss the role of selection of outsiders in the tournamentstructure and assume a contest only among insiders. The selection ofoutsiders complicates thematter but not in a way that would change the analysis considerably; outsiders are competing intournaments of their own, presumably with similar structures, and by most accounts there is abias to insider selection. E.g., William Chan, External Recruitment Versus Internal Promotion,14 J. LABOR ECON. 555, 556 (1996) (discussing the choice between internal promotion andexternal recruitment).

43, See generally Richard A. Guzzo & Marcus W. Dickson, Teams in Organizations:Recent Research on Performance and Effectiveness, 47 ANN. REv. PSYCH. 307 (1996)(examining recent research on teams and the factors that influence team effectiveness).

44. For a useful overview, see generally R. D. Avery & K. R. Murphy, PerformanceEvaluation in Work Settings, 49 ANN. REv. PSYCH. 141 (1998).

'45. ROBERT JACKALL, MORAL MAZES: THE WORLD OF CORPORATE MANAGERS 40 (1988).46. See Donald C. Langevoort, Monitoring: The Behavioral Economics ofCorporate

Compliance with Law, 2002 COLUM. Bus. L. REv. 71, 84 (discussing a method for choosing themost qualified candidate even in the face of embellishment of skills and abilities by the

1626 61 WASH. & LEE L. REV 1615 (2004)

testing. That is, the person is put into a team and evaluated periodically.Success means the possibility of promotion and assignment to another teamwith a higher level of responsibility; failure means scrutiny and a cloud overfuture prospects, if not immediate termination. There are multiple repetitionsof this game-like process, eventually creating a small subset of survivors whosucceeded repeatedly in play against many competitors.

The standard-and doubtless accurate-account ofdiscrimination in thissetting is that these evaluations are biased at least in part because those incontrol (a heavily white male population) construct images over time of whatsuccess means simply by reference to historical patterns47 that, in turn, reflecthistorical domination. Given the "group" structure of much of the managerialworkplace, white males might have a competitive advantage because of theircomfort and familiarity with the language and norms of workgroupinteraction.48 Indeed, there is a body of literature that links homogeneity withmore efficient small group performance for many kinds oftasks.49 Ifthis is thecase, white males would have a continuing advantage simply because of theirprimacy in setting the cultural norms and their numerical domination of thestatus quo.

That by itself is a plausible but relatively mild form ofcompetitive fitness.After all, there is also research that shows the benefits of diversity in smallworkgroups in terms of quality of decisionmaking. 50 Moreover, the supposedbenefits of homogeneity gradually erode once a group is established,especially in a setting that values cooperation or otherwise attains a level of

candidate or third-party "reformers"). See generally John Moran & John Morgan, EmployeeRecruiting and the Lake Wobegon Effect, 501. ECON. BEHAV. & ORG. 165 (2003).

47. For a recent study on perceptions of men and women on what constitutes a goodmanager demonstrating this bias, see generally Laurie A. Rudman & Stephen E. Kilianski,Implicit and Explicit Attitudes Toward Female Authority, 26 PERS. & Soc. PSYCH. BULL. 1315(2000).

48. See generally Charny & Gulati, supra note 33. For a good survey of this literature,see generally Francis Flynn et aI., Getting to Know You: The Influence of Personality onImpressions and Performance of Demographically Different People in Organizations, 46ADMIN. SCI, Q. 414 (2001).

49. See generally Karen A. Jehn et aI., Why Differences Make a Difference: A FieldStudy ofDiversity, Conflict, and Performance in Workgroups, 44 ADMIN. SCI, Q. 741, 741-42(1999); Orlando Richard et aI., The Impact ofVisible Diversity on Organizational Effectiveness:Disclosing the Contents in Pandora's Black Box, 8 J. Bus. & MGT. 265, 268-71 (2002); AnneS. Tsui et aI., Being Different: Relational Demography and Organizational Attachment, 37ADMIN. SCI. Q. 549,575 (1992).

50. For an overview of the conflicting strands of research in this area, see generally Robin1. Ely & David A. Thomas, Cultural Diversity at Work: The Effects ofDiversity Perspectiveson Work Group Processes and Outcomes, 46 ADMIN. SCI. Q. 229 (2001).

OVERCOMING RESISTANCE TO DIVERSITY 1627

interpersonal congruence. 51 White males hardly have a monopoly oncooperative strategies-quite the contrary. In other words, any competitiveresistance to diversity on these grounds should be comparatively fragile.

My hypothesis, however, is that there is something deeper and morepowerful going on inside the tournament. One crucial question, for instance,has to do with the appetite of executives for risk. Some people argue that theway to the top of an organization is to play it safe and engage in ingratiationand other influence tactics with one's superiors. There is something intuitiveabout this-but wrong. In highly competitive organizations, the safe strategyshould be dominated by that ofthe "lucky risk-taker." The executive who takessignificant risks will succeed repeatedly-simply by good fortune-somepercentage of the time. Other times the risk-taking will lead to predictablefailures. If we assume a large population in the organization, some smallpercentage of the risk-seekers will hit a lucky streak that will set them apartfrom both the risk-seeking losers and the play-it-safers. Association withunusually good outcomes does much for a career and can become a self­fulfilling prophecy as the lucky person is identified as brilliant and given tasksmore likely to bring further success.52

If so, then we might look for biases or traits associated with an above­average appetite for risk. Research in social cognition suggests that the twotraits related to competitive success are a high degree of self-confidence and ahigher than normal propensity to take risk. Self-confidence (optimism aboutpersonal efficacy) is associated with greater persistence, ability to persuadeothers, and the like. 53 It also leads to the willingness-perhaps out of blissfulignorance-to be entrepreneurial and risk-seeking. When rewarded with

51. See Jennifer Chatman & Francis Flynn, The Influence ofDemographic Heterogeneityon the Emergence and Consequences ofCooperative Norms in Work Teams, 44 ACAD. MGT. 1.956, 970-71 (2001) (finding that the negative effects of diversity on group functioning fadeover time)~ see also Jeffrey T. Polzer et aI., Capitalizing on Diversity: InterpersonalCongruence in Small Work Groups, 47 ADMIN. SCI, Q. 296, 316 (2002) (noting that highinterpersonal congruence moderates the negative effects of diversity on group functioning).

52. For a theoretical exploration, see generally Roland Benabou & Jean Tirole, SelfConfidence and Personal Motivation, 117 Q.J. ECON. 871 (2002). On the dangers of suchattributions, see generally Malcolm Gladwell, The Talent Myth: Are Smart People Overrated?,NEW YORKER, July 22, 2002, at 28.

53. See generally J. EDWARD Russo & PAUL SCHOEMAKER, DECISION TRAPS: TENBARRIERS TO BRILLIANT DECISION-MAKING AND How TO OVERCOME THEM (1989); MARTIN E. P.SELIGMAN, LEARNED OPTIMISM (1990); Daniel Kahneman & Dan Lovallo, Timid Choices andBold Forecasts: A Cognitive Perspective on Risk Taking, 39 MGT. SCI, 17, 27-29 (1993)~

SIMON GERVAIS ET AL., OVERCONFIDENCE, INVESTMENT POLICY, AND EXECUTIVE STOCK (RodneyL. White Center for Fin. Research, Working Paper No. 15-20), at http://papers.ssrn.com/soI3/papers.cfm?abstract=361200 (2003) (on file with the Washington and Lee Law Review).

1628 61 WASH. &LEEL. REV 1615 (2004)

positive feedback, the optimists' self-confidence increases further, and withboth the confidence and the performance, they are given even more attractiveopportunities to succeed in future rounds. 54

That research, in turn, would lead us directly to issues of diversity anddiscrimination. Both self-confidence and a propensity to take risks, accordingto psychologists, are unequally distributed along racial, cultural, and genderlines. 55 Whether there are evolutionary or socially constructed explanations forthis is controversial but unimportant for the descriptive purpose I have here. 56

One can readily see how and why white males might have higher ratings oneach of these "egocentrism" scales. And if these traits are associated withhigher payoffs-that is, compensation of higher risk-taking andaggressiveness-we would expect the eventual tournament survivors to falldisproportionately into that profile. As a result, this would reinforce thesuccess stereotypes used in heuristic settings like hiring and early-stagepromotion.

Another survivorship trait closely reflects what Carbado and Gulati wereafter and relates to the type of person who moves fluidly from point to pointwithin the firm. The need for teamwork has led some commentators in thecorporate field to predict that firms' internal norms, and presumably hiring and

54. On the spillover from this self-confidence, see generally Mathew L. A. Hayward &Donald C. Hambrick, Explaining the Premiums Paidfor Large Acquisitions: Evidence olCEOHubris, 42 ADMIN. SCI, Q. 103 (1997) (finding that indicators of CEO hubris were related tohigh premiums paid for acquisitions).

55. For evidence regarding gender differences from a financial perspective, see generallyBrad M. Barber & Terrence Odean, Boys Will Be Boys: Gender, Overconfidence and CommonStock Investment, 116 Q.J. ECON. 261 (2001) (documenting that men trade more aggressivelythan women); Nancy Ammon Jianakoplos & Alexandra Bernasek, Are Women More RiskAverse?, 36 ECON. INQUIRY 620 (1998) (finding that single women were relatively more riskaverse than single men). On cultural differences, see generally Elke U. Weber & ChristopherHsee, Cross-Cultural Differences in Risk Perception, But Cross-Cultural Similarities inAttitudes Toward Perceived Risk, 44 MGT. SCI. 1205 (1998) (finding cultural differences in riskpreferences associated primarily with cultural differences in the perception of risk rather thancultural differences in attitudes toward perceived risk).

56. To be clear, I am by no means telling a story of "natural superiority." The tournamentcreated by the probationary crucibles is plainly a social construct, and the choice to rewardcompetitive success under a highly stylized set of rules of the game is far from inevitable. Mypoint is that once the internal promotion structure of the firm has developed in the way it has(for whatever reason), it will tend to reward risktakers, which have an inflated self-confidence.If those traits are distributed unevenly, the system will be deeply biased, and the bias will behard to eliminate without very aggressive intervention. Mild tweaking will not work, forreasons beyond conventional stereotypes. To put it another way, the system's largely automatictilt favoring-both ex ante and ex post-the psychological traits unevenly distributed to whitemales creates one of the points of resistance that any effort to promote diversity will struggle toovercome.

OVERCOMING RESISTANCE TO DIVERSITY 1629

promotion practices, will be heavily skewed to reward cooperators and weedout the selfish. 57 Based both on theory and anecdotal observation, this isunlikely-though not completely off the mark. Remember that on a regularbasis managerial groups within the firm are disbanded so that loyalties mustshift to an entirely new group, never allowing people's attachments to becometoo heavily encased in cement. Moreover, there is an important individualelement to the tournament; a competitive manager has to be savvy enough toknow how and when to defect quietly to impress superiors-that is, allow his orher individualized traits to be observed when that is desirable. 58 In addition, ofcourse, the manager must behave in a highly competitive, potentially aggressivefashion toward any "out-group"-including former colleagues, perhaps-that isperceived to be a rival. In this light, the image ofthe innate cooperator does notquite describe the person likely to thrive.

Instead, the survivor is likely to be someone who can be both loyal andopportunistic, a mix that requires quite a bit of cognitive multitasking.59 Theegoist who simply fakes in-group loyalty is unlikely to survive scrutiny throughmany iterations in the crucible. There are too many higher-ups who can spotthe selfishness and who fear that the quality would eventually pose a danger.Loyalty is a bona fide survival trait. But it is one that has to be moderated inthose who want competitive success, and I would venture a guess that themoderation comes in the form of the cluster of traits that psychologists label"High Machiavellianism" or "high-Mach.,,60 This kind of person deeplyunderstands the need for mutual support and teamwork and rewards those whocooperate with intense loyalty as long as the cooperation has a positive payoff.On the other hand, he or she will defect without guilt when there is acompelling reason and the ability to do so without suffering a costly loss ofreputation. To manage this conflict,61 the high-Mach is unusually adept at

57. See, e.g., Robert Cooter & Melvin Eisenberg, Fairness, Character, and Efficiency inFirms, 149 U. PA. L. REv. 1717, 1719-21 (2001) (noting that diligence and honest performanceof agents increases efficiency).

58. Cf Canice Prendergast, A Theory of"Yes Men", 83 AM. ECON. REv. 757,769 (1993)(concluding that regarding workers on a subjective basis (effort or output) may induce them todistort their work products to reflect what they believe their superiors want to hear, which willresult in inefficiencies in the form of less accurate work products as compared with workers whoare induced to tell the truth).

59. See Martin Kilduff & David V. Day, Do Chan1eleons Get Ahead? The Effects ofSelfMonitoring on Managerial Careers, 37 ACAD. MGT. J. 1047,1055 (1994) (demonstrating that"high self-motivators" are more willing to change employers to get ahead and are more likely tobe promoted).

60. Samuel Bowles et aI., The Determinants ofEarnings: A Behavioral Approach, 39 J.ECON. LIT. 1137, 1161-62 (2001).

61. Psychologists tell us that the best actors are the ones who so internalize their roles that

1630 61 WASH & LEE L. REV. 1615 (2004)

rationalizing a shift in loyalties, something that both deflects guilt and protectsone's reputation. Through the creative use of self-deception and influencetechniques, this kind ofperson can be adaptively flexible and very persuasive toothers. Self-interest and justifiable behavior blend seamlessly.62 Researchsuggests that high-Machs are disproportionately successful in sales andmarketing63 and probably other highly competitive line and staff positions.They can be very "focused"-another favorite in the human resourcesplaybook-precisely because of their disinclination to worry aboutrelationships, commitments, or ethical distractions when there is good reason tomove on. They are adept at emotional distance.

A distinction between "grease" and "grit" captures this style ofpersonality nicely.64 "Greasy" people are those who are ethically and sociallynimble, able to make strong in-group connections-be stars at teamwork­when it serves both their interests and the group's interest, as it so often will.But they can move away without the heavy baggage of regret when the

economics dictate. Their skills accelerate the process of ongoing short-termnegotiations (perceptual as well as contractual) and are thus favored insidethe firm. In contrast, "gritty" people are those with the traits or preferences,whether ethical or social, that make internal negotiations more difficultbecause of the dissonance they introduce. If they slow things down in a highvelocity environment, they will be disfavored. Again, over time, tournamentsurvivors will disproportionately display favored tendencies. Grease winsover grit. 65

they have no conscious awareness that they are deceiving anyone in the first place.

62. See George Loewenstein, Behavioral Decision Theory and Business Ethics: SkewedTrade-Offs Between Self and Other, in CODES OF CONDUCT: BEHAVIORAL RESEARCH INTOBUSINESS ETHICS 214,221-23 (David Messick & Ann Tenbrunsel eds., 1996) (summarizingresearch on rationalization and noting the "[i]t is by now well established that people tend toconflate what is personally beneficial with what is fair or moral"). One mediating technique forrationalizing defection is to think of the victims as deserving it because of their own disloyaltyto the group's goals. If that story is believed, others will not view the defection as inappropriatebecause the victims brought it on themselves.

63. See Myron Gable & Frank Dangello, Locus of Control, Machiavellianism, andManagerial Job Performance, 128 J. PSYCH. 599,600 (1994) (noting that managers with high­Mach scores should be more effective than those with "lower-Mach" scores).

64. See Donald C. Langevoort, The Organizational Psychology ofHyper-Competition:Corporate Irresponsibility and the Lessons ofEnron, 70 GEO. WASH. L. REv. 968, 970 (2002)(discussing personality characteristics, such as a high degree of self-confidence and ethicalplasticity, associated with advancement up the corporate hierarchy).

65. Obviously, too much grease is dangerous. What I am describing is a more controlledform of plasticity.

OVERCOMING RESISTANCE TO DIVERSITY 1631

The diversity implications here are a bit more speculative but important.Going back to the point about small group efficiency, there is some reason tobelieve that the negotiation process is smoother when similar rather thandifferent people are involved; if so, there is a small amount ofgrit added simplyby being different. That certainly is the case ifthe person in question demandsto be authentic in those differences,66 leading to the prediction that any diversitythat is pursued will be women and Ininorities who mimic white male traits,including negative stereotyping of other women and minorities. 67 The loyaltydimension is more ambiguous. If loyalty or connectedness were all that was atstake, then research would by no means suggest a white male advantage. But ifthe adaptive trait is something more plastic-strong, quick bonds, but only whendelivering a positive payoff, coupled with an ability to be extremely aggressivevis-a-vis out-group members, including former associates-then that advantagemight have at least a gender bias, ifnot a racial one. It is quite possible that whitemales on average score higher on the grease scale.68

If the latter is true, then any survivorship bias derived from the first twotraits, overconfidence and a taste for risk, is strengthened. As far as diversity anddiscrimination are concerned, we can draw a couple of inferences. First, theobvious: We now have further reason to fear that the closer we look at theinternal workings ofthe firm, the more we see why, on average, white male traitsmight generate positive abnormal returns (at compound interest) the longer thetournalnent goes on, predicting survivorship quite apart from the effects ofstereotyped perception. Moreover, any effort to eradicate this bias will encounterresistance on competitive grounds as a result. Hence, we cannot be overlyoptimistic about "tweaking" strategies when compared to more aggressiveintervention to promote diversity and nondiscrimination. Second, we have atroubling externality as to the personality type most likely to hold the reins ofpower in a firm. If a bias toward overconfidence, risk-taking, and ethicalplasticity-however efficient inside the tournament structure-is socially

66. See Devon W. Carbado & G. Mitu Gulati, Working Identity, 85 CORNELL L. REv.1259, 1263-66 (2000) (discussing the costs associated with asserting individual characteristicsthat are contrary to the work identity); Wilkins, supra note 18, at 1587 (noting that "conflictsand communication issues" impact diverse groups).

67. See generally Naomi Ellemers et aI., Sticking Together or Falling Apart: In-GroupIdentification as a Psychological Determinant of Group Commitment Versus IndividualMobility, 72 J. PERS. & Soc. PSYCH. 617 (1997).

68. See Linda K. Stroh et aI., All the Right Stuff: A Comparison ofFemale and MaleManagers' Career Progression, 77 1. APP. PSYCH. 251, 257-58 (1992) (noting that women whohave equal qualifications and follow similar career paths as men continue to receive lowersalaries).

1632 61 WASH. & LEE L. REV 1615 (2004)

troublesome because of the externalities associated with the kinds of businessdecisions the bias generates, then diversity initiatives might have a positive effectby neutralizing SOlne of this bias.

III. Firm-Wide Efficiency

What was suggested above is a form of adaptation within the internalpromotion structure ofthe firm. Certain traits lead to survivorship, meaning thatthere is a positive payoff to the individual who possesses them inside internallabor markets. This conclusion, however, does not necessarily mean that thesame structure-favoring those who exhibit excessive optimism, have a relativelyhigh risk-tolerance, and are ethically flexible-has a positive payoff for thecompany as a whole.69 Perhaps, as Bob Cooter and Mel Eisenberg argue,70 frrmswould prefer internal norms that reflect more stringent habits of character andintegrity and thus would seek to counter the biases built into the tournamentstructure by revising the firm's hiring and promotion practices.

While there is no hard evidence one way or the other, there is no reason topredict with any confidence that the tournament structure I have described­however troubling from a societal perspective-is maladaptive at the level ofthefirm. Translating individual personality traits into indicators of firm-wideperformance is difficult, of course,71 but the first two traits described earlier,optimism and high risk-tolerance, are likely to have the same kinds of positivepayoffs when embedded in the firm's senior management culture with respect tocompetition among firms as it does for managers internally.72 That is, a firm thatperseveres, acts aggressively, and takes calculated risks will, on average, be

69. It is well recognized that organizations have to counteract the cognitive biases ofindividual employees to some degree. See, e.g., Chip Heath et aI., Cognitive Repairs: HowOrganizational Practices Can Compensate for Individual Shortcomings, 20 REs. ON ORG.BEHAV. 1, 6-7 (1993) (noting how individuals often attribute their success to stable, internalfactors, while attributing their failures to unstable, environmental factors and discussing theneed for organizations to counteract or repair this self-serving bias to ensure that success is notsimply due to luck or other external factors).

70. See Cooter & Eisenberg, supra note 57, at 1726-28 (noting that screening andfiltering are more effective methods for assuring good agent character than education orsocialization).

71. See Barry M. Staw & Robert I. Sutton, Macro Organizational Psychology, in SOCIALPSYCHOLOGY IN ORGANIZATIONS: AnvANCES IN THEORY AND RESEARCH 350, 350-51 (J. KeithMurnighan ed., 1993) (noting the lack of research into using psychological theory to understandorganizational-level behavior).

72. See Langevoort, supra note 27, at 152-56 (discussing adaptive biases, particularly therelationship between optimism, risk-taking activity, and success).

OVERCOMING RESISTANCE TO DIVERSITY 1633

rewarded. While there may not be a tight coupling between internal promotionpolicies and the establishment of firm-wide habits, one should not bet against it.As to ethical plasticity, the conclusion is much the same. Firms need to besensitive to external demands for legitimate behavior in setting policy but aremore profitable, on average, ifthey construe what is legitimate with a self-servingbias. Of course, if we are right about whom the survivors of the firm's internalpromotion tournament are likely to be, this plasticity will come naturally.

IV Self-Serving Resistance

Now let us turn to what the foregoing means for nondiscrimination. Wecannot, in the name of diversity, claim that these deep biases need to beeradicated simply to gain firm-wide efficiency. We should not dismiss thatpossibility, but the affirmative case is difficult to demonstrate to anyone notpredisposed toward it. The likely payoffs to homogeneity are too strong. Thus,any effort to push diversity must be based on other reasoning. Here we returnto the possibilities mentioned earlier. One is because the law demands it-aproposition undermined if the law takes a strong stand only against overtdiscrimination, as it does today.73 Another is because diversity makes thecompany more legitimate in the eyes of key constituents. The third is becausediversity may be a business necessity in order to attract the quantity of skilledmanagers needed to survive or prosper. Initiatives driven by these forces arewhat Susan Sturm explores so well in her article. 74

If there is one thing clear in the business literature, it is that seniormanagement errs severely if it assumes that because it is convinced that acertain initiative is good for the firm, employees will see it the same way. Ofcourse, executives realize that employees may resist an initiative because it isnot in their self-interest. But they assume that employees are aware of theirselfishness, privately at least, and so assume that management has the moralhigh ground in the ensuing battle and can use guilt as a tactic for overcoming

73. See Linda Hamilton Krieger, The Content of Our Categories: A Cognitive BiasApproach to Discrimination and Equal Employment Opportunity, 47 STAN. L. REv. 1161,1247-48 (1995) (suggesting that many biased employment decisions result from a variety ofunintentional categorization-related judgment errors rather than, as legal interpretation ofTitleVII assumes, a conscious discriminatory purpose, and arguing that, if Title VII is to retain itseffectiveness, this legal assumption must change). See generally Charles R. Lawrence III, TheId, the Ego and Equal Protection: Reckoning with Unconscious Racism, in FOUNDATIONS OF

EMPLOYMENT DISCRIMINATION LAW 122, 124-25 (John 1. Donahue III ed., 1997).74. See generally Sturm, supra note 17..

1634 61 WASH. & LEE L. REV 1615 (2004)

the employees' resistance. Top-down initiatives often have a preachy quality tothem.75

Research counsels otherwise. As with many people, resistant managersare likely to convince themselves that what they believe is right and reasonableand denigrate senior management's motives to the extent that they arethreatening.76 Much work on affirmative action falls into this category; peopleopposed to it both articulate and convince themselves that they have the moralhigh ground. As Christopher Federico and Jim Sidanius claim/7 this may beself-deception-the principled objections really do reflect a self-serving desireto maintain dominance-but it is no less convincing to the holder of thatviewpoint. Attitude change is unlikely. I suspect that the same would be trueof insistence to white or male managerial employees that a diversity-basedinitiative is a business necessity. That is just as likely to provoke the beliefthatthe initiative is being imposed for illegitimate political reasons or externalpressures that will not serve the company's best interests. It will take betteradvocacy than that to reduce resistance or induce cooperation.78

75. As with many corporate governance and management-style activities, these may beeasy to promote disingenuously. See, e.g., James D. Westphal & Edward J. Zajac, The SymbolicManagement ofStockholders: Corporate Governance Reforms and Shareholder Reactions, 43ADMIN. SCI, Q. 127, 129-35 (1998) (discussing a corporate trend towards announcing long-termincentive plans thought to focus executives on longer-term goals but making either noimplementation or only trivial implementation in order to gain favorable market treatment atminimal cost and risk). For a critical exploration of compliance initiatives along these lines,including those in the nondiscrimination area, see generally Kimberly D. Krawiec, CosmeticCompliance and the Failure ofNegotiated Governance, 81 WASH. U. L.Q. 487 (2003) (arguingthat internal compliance programs and corporate conduct codes may lead to under enforcementand under deterrence).

76. See supra notes 60-62 and accompanying text (explaining the self-servingrationalization process that some employees experience in pursuit of success).

77. See generally Christopher M. Federico & Jim Sidanius, Racism, Ideology andAffirmative Action Revisited: The Antecedents and Consequences of"Principled Objections" toAffirmative Action, 82 1. PERS. & Soc. PSYCH. 488 (2002).

78. In addition, political ideology can come into play in business settings. A dispositionto conservatism inclines people to reject psychologically grounded "excuses" for decisions infavor of an inflated vision ofmerit and just dessert. In other words, conservatives tend to doubtthe existence and relevance of cognitive biases. See Phillip E. Tetlock, Cognitive Biases andOrganizational Correctives: Do Both Disease and Cure Depend on the Politics of theBeholder?, 45 ADMIN. SCI, Q. 293,320-24 (2000) (discussing the correlation between politicalviewpoint and management style).

OVERCOMING RESISTANCE TO DIVERSITY

V. Constructive Intervention

1635

Having suggested something about the likely depth ofresistance diversity­based initiatives are likely to face in many firms, I now want to return toSturm's account of the success of "problem-solving" kinds of programs atDeloitte, Intel, and Home Depot. My purpose here is to push harder on thequestion ofwhat forces might have contributed to the apparent success oftheseprograms and connect some possible answers to broader issues that haveemerged at the corporate governance and human resources nexus.

At the risk of clinging too long to the pessimistic side of the story, I willstart with an observation made by Sturm's interviewees twice in her account:Corporate executives do not "purchase" diversity-based compliance programswillingly, even when persuaded in the abstract oftheir value. It takes the threatof a lawsuit or some forceful top-down command to get their attention. 79 Thetwo people quoted both identify "short-term" performance pressure on linemanagers as the motivating reason to pursue these programs.80 This concern, ofcourse, goes far beyond diversity-based compliance to an issue at the heart ofcorporate governance. At the highest levels ofthe firm, is there a systemic biastoward hitting quarterly earnings and revenues targets that distractsmanagement from longer-term investments? In the empirical literature, this is amatter of some controversy but is at least a possibility. 81

My sense is that pushing down the responsibility for diversity andnondiscrimination to the more local level exacerbates this possibility. Adelegation ofthis kind would not be surprising; most human resources issues

79. See Sturm, supra note 17, at 532-33 (describing a suit brought by African-Americanemployees getting the attention of Southern California Edison).

80. Id. at 499 n.145, 543 n.314. Psychologists and economists have uncovered muchevidence showing that we are already biased toward the short-term. See, e.g., Shane Fredericket aI., Time Discounting and Time Preference: A Critical Review, 40 J. EeON. LIT. 351, 366-77,389-93 (2002) (discussing alternative models to predict economic decisions over time and howvarious personality traits and life experiences may combine to influence future choices).

81. See, e.g., Jeremy C. Stein, EffiCient Capital Markets, Inefficient Firms: A Model ofMyopic Corporate Behavior, 104 Q.J. EeoN. 655, 661-76 (1989) (arguing that greatermanagerial concern over stock prices leads to a greater tendency to take a short-term myopicapproach toward investing corporate funds); Anjan V. Thakor, Investment "Myopia" and theInternal Organization of Capital Allocation Decisions, 6 J.L. EeON. & ORG. 129, 143-45(1990) (arguing that biases toward short-term investments are imposed on corporations by thecapital market's preference toward current shareholders). From a legal perspective, seegenerally Henry T. C. Hu, Risk, Time and Fiduciary Principles in Corporate Investment, 38UCLA L. REv. 277 (1990) (critiquing the presumption ofoverly risk-averse corporate behavior,advocating policies that encourage corporations to behave to maximize theoretical perfect­market stock value, and eliminating accounting-based biases).

1636 61 WASH. & LEE L. REV 1615 (2004)

are implemented at the middle-management level, with only general statementsof direction from above. Ifmiddle managers have discretionary responsibilityover implementing diversity, then the simple question is whether the way inwhich we measure their success encourages long-term investments. On avariety of grounds, there is reason to doubt it. Most obviously, if theirperformance is based on easily generated financial metrics, long-term diversitypayoffs are unlikely to be captured as anything but a drag. 82 Some of themanagers Sturm interviewed made this point explicitly.83 What I would addhere is the exacerbating effect of the tournament structure I emphasized in theprevious sections. If managers are rotated frequently through differentassignments, with promotion decisions based on methods that overvalue themost recent experience, then there is an additional reason to expect disinterestin diversity investments. Even ifthey do payoffeventually, it will become toolate to have an effect on the career of the innovator and be easy for theinnovator's successor to appropriate as his or her own. If that is the incentivestructure, then middle managers will-through rationalization and self-servinginference-attend to other priorities and ignore the generalized direction fromabove. In other words, the tournament structure contributes to line-level short­termism, encouraging the use of grease and an aversion to grit in localdecisions.

In Sturm's descriptions ofIntel and Deloitte, in particular, we see differentkinds of interventions designed to trump this effect. Deloitte's program,designed to increase the number of women in high-powered consultingpositions at the firm, begins by eschewing localism-it was distinctly a top­down initiative managed by the firm's chief executive, albeit with widespreadinvolvement from subordinates in its formulation (a subject explored in moredetail below).84 More importantly, perhaps, it worked toward the developmentof highly objective benchmarks that line managers were instructed to meet. 85

Though not quotas, I suspect that the benchmarks came close to being that. Insum, this was a very aggressive intervention that worked directly at theincentive level within the firm.

Intel's intervention was different and somewhat softer. 86 Its design wasto bypass line managers by creating a separate and powerful locus of

82. See Sturm, supra note 17, at 543 (discussing corporate tendencies to ignore issues thatdo not impact the short-term bottom line).

83. Id. at 543 n.314.84. See id. at 492-99 (describing Deloitte & Touche CEO Mike Cook's personal

involvement in the efforts to increase retention of women).

85. Id. at 496 n.126.86. See id. at 499-509 (describing Intel's Human Resources reorganization).

OVERCOMING RESISTANCE TO DIVERSITY 1637

authority-the human resources and legal staffs-that had the ability tointervene to improve the quality and fairness of work for its increasinglydiverse, highly skilled employees. What is noteworthy here is the power. Incontrast to monitoring and compliance groups in many other firms,87 this groupcould override self-serving line-manager decisions. Interestingly, Intel does notlimit this to employment practices; its antitrust compliance program is alsounique in its aggressively interventionist tactics. 88

Both Intel and Deloitte depend on one thing in particular to make theseinterventions effective: information. Sturm rightly emphasizes the importanceofthis. 89 If I am right that there is an embedded efficiency bias toward greaserather than grit, which diversity initiatives threaten, then the system'sinclination will be to obscure practices that contribute toward discriminationrather than to expose them. Those with power have no incentive to generatehard data but rather will try to rationalize the process with window-dressingsymbols of compliance designed to deflect attention away from any embeddedproblems.9o Intel and Deloitte used sophisticated management informationsystem (MIS) techniques to monitor outcomes, thereby avoiding reliance onself-serving statements of compliance from below.

This brings us to an important connection between corporate governanceand human resources and a promising area for future inquiry. There is afamiliar phrase that "you manage what you measure. ,,91 In a system in whichmetrics are almost exclusively in the form ofconventional financial accounting,the incentives are biased toward meeting and exceeding those accountingbenchmarks used for promotion and compensation, in whatever time periodschosen for those measurements. We understand the imprecision or artificialityof many of these measures yet still use them because they are conventionallyunderstood as the best measures available.

87. See Langevoort, supra note 46, at 101 (describing the optimal strategy withincompliance structures of reliance on line supervision monitoring, "backed up by low­powered ... compliance specialists").

88. See David B. Yoffie & Mary Kwak, Playing By the Rules: How Intel Avoids AntitrustLitigation, HARV. Bus. REv., June 2001, at 119, 120-21 (describing Intel's antitrust lawcompliance strategies in which internal standards are designed to avoid both clear violations andlegal"gray-areas").

89. See Sturm, supra note 17, at 519-20 (discussing traits the successful case studies havein common).

90. See Lauren B. Edelman & Mark C. Suchman, The Legal Environments ofOrganizations, 23 ANN. REv. Soc. 479,487-92 (1997) (describing the behavior ofmaterialisticcorporations).

91. See Louis Lowenstein, Financial Transparency and Corporate Governance: YouManage What You Measure, 96 COLUM. L. REv. 1335,1335 (1996) (discussing the effects offinancial disclosure on corporate management).

1638 61 WASH. & LEE L. REV 1615 (2004)

What accountants, business people, and others interested in corporategovernance are now coming to appreciate is that advances in informationtechnology invite a new search for better metrics ofcorporate performance. Byall accounts, conventional accounting and MIS fail to capture the connectionbetween human resources activities within the firm and the firm's productivityand also fail to capture practices that lead to innovation and the creation ofintellectual property. But, a good bit ofrecent work makes these measurementsmore sophisticated.92 As these metrics develop, we should see more sunlightshed on human resources practices-including diversity-based ones-that willafford us a greater understanding of their efficiency implications.

This, in turn, will bring human resources practices closer to the orthodoxconcern ofthe corporate law scholar, the capital marketplace. Over the last fewyears, a number of people interested in corporate disclosure have beenconsidering the possibility that, if standardized metrics that capture humanresources-and intellectual property-practices within the firm can bedeveloped, they should be made publicly available, just as financial accountingdata is today.93 Thus, investment decisions would be affected by-and rewardor punish-either superior or inferior performance on these standards. While Iremain skeptical that objective metrics for all corporations will be easy toderive,94 I have no doubt that the exploration is worthwhile and, if successful,would have a dramatic influence on behavior.

If so, we could indeed learn much about diversity and nondiscrimination.We could find more sensitive correlations between diversity initiatives andmeasures of productivity. To be sure, this may not bring welcome news; inother areas of corporate governance, studies often failed to support theconnection between seemingly desirable organizational changes-likeindependent boards of directors95-and firm profitability. We might, in other

92. See, e.g., Jacques Mairesse & Pierre Mohnen, Accounting for Innovation andMeasuring Innovativeness: An Illustrative Framework and Illustration, 92 AM. ECON. REv.(PAPERS & PROC.) 226,226-27 (2002) (proposing an accounting framework for innovation).

93. See UNSEEN WEALTH: REpORT OF THE BROOKINGS TASK FORCE ON INTANGIBLES 57-71(Margaret Blair & Steven Wallman, co-chairs, 2001) (recommending a regulatory framework toexpand economic reporting to include intangibles in a regular and regulated manner).

94. As with many corporate governance and management-style activities, these may beeasy to promote disingenuously. See, e.g., Westphal & Zajac, supra note 75, at 129-35(discussing a corporate trend toward announcing long-term incentive plans thought to focusexecutives on longer-term goals but making either no implementation or only trivialimplementation in order to gain favorable market treatment at minimal cost and risk).

95. See, e.g., Sanjai Bhagat & Bernard Black, The Uncertain Relationship Between BoardComposition and Firm Performance, 54 Bus. LAW. 921,944-50 (1999) (finding no positivecorrelation between an independent board of directors and firm profitability). For a study of

OVERCOMING RESISTANCE TO DIVERSITY 1639

words, find that grease-laden firms are efficient competitors, so that diversityhas to be justified as good for the public rather than good for business.

Whatever the eventual outcome ofthis public disclosure inquiry, Sturm isright that private data-tracking efforts, which can be customized on a firm-by­firm basis, are the key to any effort to overcome internal resistance to diversityinitiatives.96 Once senior management decides to commit the firm to diversity,objective performance indicators are essential to expose the self-servingrationalizations bound to emerge from below. Information alone, however, isno solution. Ifthere is resistance to the implementation ofdiversity initiatives,it must be countered. Data provides crucial intelligence, but it takes theexercise of either power or persuasion-skillful negotiating-to obtain goodoutcomes.

The Deloitte experience exemplifies the deft use of power.97 The chiefexecutive officer took personal control over the implementation of the firm'sdiversity task force, which in turn set fairly specific performance benchmarksbolstered by detailed information gathering to monitor compliance. That, Isuspect, is a rather rare occurrence. Most CEOs are unwilling to take that sortof risk or devote enough time and attention to the task. They may takesymbolic steps along those lines, but without substance. Indeed, if I am rightabout biases in the promotion tournament that lead to an excess of ethicallyplastic Machiavellianism in the executive suite, we have no reason to expect agenuine commitment to the effort as opposed to a strategic preference formaintaining as greasy a system as possible consistent with whateverprodiversity needs the firm faces. And, whatever commitment there is mightnot be long-lived.

Even where there is the exercise of top-down power, some unintendedconsequences are likely. Imagine that we have a CEO who is committed­presumably for competitive reasons-to increasing diversity. As notedearlier, employees threatened by these initiatives are likely to feel no

trends and fads in managerial behavior, see Mark J. Zbaracki, The Rhetoric and Reality ofTotalQuality Management, 43 ADMIN. SCI. Q. 602,612-29 (1998) (discussing the adoption ofTotalQuality Management programs at several institutions). Notwithstanding, managers are oftenhighly evaluated and compensated for being on top ofthe latest "learning." See Barry M. Staw& Lisa D. Epstein, What Bandwagons Bring: Effects ofPopular Management Techniques onCorporate Perforn'lance, Reputation, and CEO Pay, 45 ADMIN. SCI. Q. 523, 542-44 (2000)(discussing positive correlations between implementation of popular business techniques, suchas Total Quality Management, and CEO pay, regardless of actual business performance).

96. See Sturm, supra note 17, at 519-20 (discussing traits the successful case studies citedhave in common).

97. See id. at 492-93 (describing the Deloitte CEO's personal efforts to address thecompany's gender problems).

1640 61 WASH. & LEE L. REV 1615 (2004)

guilt in their resistance or opposition; they will rationalize their response inprincipled terms, however self-serving the underlying motivation. Anyauthoritarian effort to overcome this resistance, although possibly successful inforcing the desired outcome, is likely to lead to a reduction in the motivationand morale ofthe employees whose will was overborne. This is another reason,I suspect, that top-down initiatives are often more symbolic than real; manyexecutives, especially in highly competitive firms, fear the indirect productivitylosses that flow from the winning ofthe immediate battle. Internal motivationis one of the operational imperatives in many organizations and is not readilyput at risk.98

The more common technique for implementing a diversity initiative is todelegate it to some combination of legal and human resources specialists, asIntel did. That is dangerous, of course, for it can mean a loss of authority,unless there is some mechanism by which the CEO stands behind this group(which just created an indirect form of what we have just discussed). In manyindustries, we observe relatively low-powered compliance groups, which arelikely to police only for fairly egregious violations that unambiguously threatenthe firm's self-interest. Beyond that, their task is to create the appearance'ofattention to legal norms to protect the firm from charges of wholesaleindifference. It is largely window dressing.

Sociologists, however, point out that this kind of impotence by design­though probably common-is not inevitable. In a well-known series ofarticles, Lauren Edelman and her colleagues studied the implementation ofEEOC directives in firms. Because EEOC directives are ambiguous exceptwhen directed at conduct that is blatantly discriminatory, firms responding tothem have a range of possible responses. One-found fairly often-wassymbolic compliance without taking any steps that pose a serious threat tomanagerial discretion. 99 But their field studies were not entirely pessimistic.

98. See Langevoort, supra note 46, at 96-99 (describing loss ofmotivation as an indirectcost imposed by conflict and hostility between employees and compliance officers).

99. See, e.g., Lauren B. Edelman, Legal Ambiguity and Symbolic Structures:Organizational Mediation o/Civil Rights Law, 97 AM. J. Soc. 1531, 1538-47 (1992) (arguingthat managerial desire to simultaneously avoid the perceived negative impacts of equalemployment opportunity law and to appear to be in compliance with the law encourages astrategy of emphasizing procedure over substance and appearance over reality); Lauren B.Edelman et aI., Legal Ambiguity and the Politics o/Compliance: Afjirfnative Action Ofjicers'Dilemma, 13 LAW & POL'y 73,90-92 (1991) (analyzing strategies that various affirmativeaction officers adopt to cope with competing demands from minorities and administrators);Lauren B. Edelman et aI., The Endogeneity 0/Legal Regulation: Grievance Procedures asRational Myth, 105 AM. J. Soc. 406, 445-49 (1999) (discussing how "rational myths" about thelaw in the employment practices context, as organizations seek the appearance of compliance,can become the economic and legal reality).

OVERCOMING RESISTANCE TO DIVERSITY 1641

A natural consequence ofdelegating compliance to a professional group, evenif it lacked power initially, was that the group would seek to expand its power.And, in the equal employment opportunity area, at least, such groups have beenfairly savvy.

One tactic is message sharpening. Where the law is relatively ambiguous,a professional group can claim exclusive expertise over the interpretive processand choose an interpretation that overstates the law's demands. loo With thatinterpretation as a club, the group gains more power simply because of theperception that the firm has no choice but to comply and must rely on the groupto manage the compliance process.

Professional groups within the firm also use social networks to theiradvantage. By making allies with a variety of groups outside the firm(compliance officials in other firITIS, organizations devoted to promotingcompliance, and others), the inside professionals have a couple of advantages.First, they gain support for their construals ofthe law's demands-professionalorganizations can endorse aggressive readings of the law, which can then becited internally as authority. Second, to the extent that other firms haveengaged in stronger compliance steps, the professional network can identifyand highlight them, creating pressure on others to conform. These professionalnetworks have shown surprising strength in causing what sociologists call"mimetic" responses. 10l And once a few firms mimic the innovator, thepressure on the others increases that much more.

Sturm's account of Deloitte's experience reveals a fairly savvy use ofprofessional networking. lo2 Outside organizations devoted to improving thestatus of women in business firms were involved in the design and monitoringof the Women's Initiativelo3-a classic use of a bonding device designed toincrease the threat to the reputation of the company should there be any

100. See Lauren B. Edelman et aI., Professional Construction ofLaw: The Inflated Threatof Wrongful Discharge, 26 LAW & SOC'y REv. 47, 57-62, 71-75 (1992) (discussing how thethreat to employers from wrongful discharge suits has been exaggerated by misleading data andhyperbolic language, in part to increase demand for lawyers); see also Donald C. Langevoort &Robert K. Rasmussen, Skewing the Results: The Role ofLawyers in Transmitting Legal Rules,5 S. CAL. INTERDISC. L.J. 375, 392-99 (1997) (predicting that lawyers will often overstate legalrisks to clients when giving legal advice because incentives to overstate far outweigh incentivesto be accurate).

101. See Paul 1. DiMaggio & Walter W. Powell, The Iron Cage Revisited: InstitutionalIsomorphism and Collective Rationality in Organizational Fields, 48 AM. Soc. REv. 147, 150­52 (1983) (describing "mimetic" isomorphism as a result of responses to uncertainty that, alongwith coercive and normative processes, results in great similarities among institutions).

102. See Sturm, supra note 17, at 498-99 (describing the use of external professionalnetworking groups at Deloitte).

103. Id.

1642 61 WASH & LEE L. REV 1615 (2004)

backsliding. Sturm characterizes these external advisory groups as ones thatboth "provided a continual source of reflection and protected the process frominternal capture.,,104 Sturm's description of Home Depot relates a similarbonding effort using outside interest groups, largely a spillover from the classaction that led to the reforms. 105

I suspect that the clever inside group can sometimes even turn windowdressing into substance. Imagine, as is probably fairly common, a diversityinitiative by senior management designed to counter negative attention or asymbolic lawsuit, creating minimal interference with greasy patterns of biasdeep within the company. One strategy would be to declare this program amodel and invite close external scrutiny by the press, interest groups, andothers. That by itself probably would cause pressure to generate observableresults. The risk, of course, is that senior management will consider this to beinsubordination and punish the prodiversity group. If senior management isstrongly opposed to substantial change, that risk will no doubt deter muchexperimentation. But this opposition might be softened by a gradual approachand a careful attribution of credit for the initiative to the CEO or boardmembers. This is simple influence utilizing cognitive dissonance. 106 Inducingsmall steps ofcommitment by the CEO-bolstered by positive feedback-canprovoke an attitude shift that may lead to more substantial support for theinitiative. 107

The point here goes back to my metaphor of the firm as a nexus ofnegotiations. The promotion of diversity mayor may not hold a position ofpower within the firm. If I am right about the usual efficiency of grease overgrit, its power rarely will be great. Simple demands of adherence because ofthe rightness ofthe cause are unlikely to provoke a cooperative response amongthose who disagree on (perhaps self-serving) principled grounds. 108 That is badnegotiation, though a tactic that comes naturally to many lawyers. It leads toreactive devaluation. A good negotiator knows how to leverage the

104. Id. at 499.

105. Id.at516-17.

106. See, e.g., ROBERT CIALDINI, INFLUENCE: THE PSYCHOLOGY OF PERSUASION 17-55(1993) (discussing reciprocation as a major psychological method used to gain compliance fromothers).

107. Id. at 57-111 (citing the use of the natural desire to be seen as consistent as a tool thatcan cause changes in self-image and in attitude both in the marketplace and in politicalphilosophy).

108. See Kimberly A. Wade-Benzoni et aI., Barriers to Resolution in Ideologically BasedNegotiations: The Role of Values and Institutions, 27 ACAD. MGT. REv. 41, 43-47 (2002)(discussing problems raised in negotiations caused by different initial moral and ideologicalpositions in a personal and institutional context).

OVERCOMING RESISTANCE TO DIVERSITY 1643

legitimacy of what she is claiming and find ways of reducing, if noteliminating, the coercive message in a demand.

In sum, diversity is something that typically has to be sold to other interestgroups within the firm, some of which will be resistant for the reasonsdiscussed. The sales pitch has to be devised so as to minimize the threat ofdisempowerment. One tried technique, ofcourse, is to characterize diversity asplainly good for productivity, whether or not the empirical reality clearlysupports the inference. Holding out the promise that these returns, once theyarrive, will be broadly shared-even if invoking something of an illusion­might be the kind ofmessage that would work by increasing the perceived sizeof the profits pie. The kind of co-optation that can be practiced on seniormanagement might also be effective as applied to potential sources ofresistanceat lower levels in the organization. Key groups, one small step at a time, couldbe brought into the planning and implementation ofdiversity initiatives in sucha way that they would be credited for lowering their resistance, and in theprocess, giving them a psychological stake in the program's success. Thesetechniques are well known in the human resources and organizational behaviorliterature and presumably taught to professionals in those fields. I will leavetheir elaboration to others who know them better. My point here is that theyalso have both a legal compliance and a corporate governance function, oncewe see both compliance and governance through the wide-angled lens of thetheory of the firm. In other words, they illustrate well an area that can beunderstood much better by merging learning from both corporate governanceand human resources.